Correlation Between Merck and Vanguard Communication
Can any of the company-specific risk be diversified away by investing in both Merck and Vanguard Communication at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Merck and Vanguard Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Merck Company and Vanguard Communication Services, you can compare the effects of market volatilities on Merck and Vanguard Communication and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Merck with a short position of Vanguard Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Merck and Vanguard Communication.
Diversification Opportunities for Merck and Vanguard Communication
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Merck and Vanguard is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Merck Company and Vanguard Communication Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Communication and Merck is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Merck Company are associated (or correlated) with Vanguard Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Communication has no effect on the direction of Merck i.e., Merck and Vanguard Communication go up and down completely randomly.
Pair Corralation between Merck and Vanguard Communication
Considering the 90-day investment horizon Merck Company is expected to under-perform the Vanguard Communication. In addition to that, Merck is 1.2 times more volatile than Vanguard Communication Services. It trades about -0.04 of its total potential returns per unit of risk. Vanguard Communication Services is currently generating about 0.06 per unit of volatility. If you would invest 11,556 in Vanguard Communication Services on January 12, 2025 and sell it today you would earn a total of 2,582 from holding Vanguard Communication Services or generate 22.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Merck Company vs. Vanguard Communication Service
Performance |
| Timeline |
| Merck Company |
| Vanguard Communication |
Merck and Vanguard Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Merck and Vanguard Communication
The main advantage of trading using opposite Merck and Vanguard Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Merck position performs unexpectedly, Vanguard Communication can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Vanguard Communication will offset losses from the drop in Vanguard Communication's long position.| Merck vs. Upper Street Marketing | Merck vs. Virtual Medical International | Merck vs. Grey Cloak Tech | Merck vs. CuraScientific Corp |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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